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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-10 · 276 added, 142 removed, 246 unchanged (63% of the section changed)

51 unchanged sentences

These properties may be wholly owned or by unconsolidated joint ventures in which we generally contribute a significant portion of the equity.

At March 31, 2022, we:

(i) wholly-own eleven multi-family with an aggregate of 2,864 units and a carrying value of $326.3 million;

At June 30, 2022, we:

(i) wholly-own sixteen multi-family with an aggregate of 3,848 units and a carrying value of $445.9 million;

(ii) have ownership interests, through unconsolidated entities, in 14 multi-family properties with 4,557 units and a carrying value of $76.7 million;

and (iii) have a 17.45% interest in a 240-unit multi-family development property with a carrying value of $3.0 million

(excluding $1.4 million held in escrow).

(excluding $500,000 held in escrow).

The 31 properties are located in 11 states;

most of the properties are located in the Southeast United States and Texas.

See " -Off Balance Sheet Arrangements " for information regarding the contributions to, and our reliance on, the cash flow and liquidity provided by the properties owned by our unconsolidated subsidiaries.

See " -Other Financing Sources And Arrangements " for information regarding the contributions to, and our reliance on, the cash flow and liquidity provided by the properties owned by our unconsolidated subsidiaries.

Challenges and Uncertainties Presented by COVID-19

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Buyout of Interests in Joint Ventures

As disclosed in our Annual Report, our acquisition efforts in 2022 are focused on purchasing the remaining interests of our joint venture partners in joint ventures that own multifamily properties.

We refer to such purchases as the “Partner Buyouts”.

After a Partner Buyout is completed, such multifamily property will be wholly owned and the accounts and operations of such property will be included in our consolidated balance sheet and statements of operations, respectively, as of the date of completion of such purchase.

We anticipate that our assets, liabilities, revenues and expenses will increase significantly as a result of these Partner Buyouts.

Due to the timing that contemplates that the sales of Retreat at Cinco Ranch and The Vive (the "Cinco/Vive Sales") described below ( "-Property Dispositions - Dispositions of Joint Venture Properties - Contracts to Dispose of Joint Venture Properties" ) will be completed before all the Partner Buyouts described below ( i.e.

, the Partner Buyouts completed or to be completed after March 31, 2022) are completed, and after giving effect to the Shavano Sale (as described below), it is expected that there may be a slight decline in operating results in the quarter ending June 30, 2022, and that after the Cinco/Vive Sales and the Partner Buyouts described below are completed, such transactions will not have a material impact in the short-term on our net income, funds from operations or adjusted funds from operations.

After giving effect to the Cinco/Vive Sales and the Partner Buyouts described below, our consolidated balance sheet will include an additional (i) $217.4 million of mortgage debt with a weighted average remaining term to maturity of 6.5 years and a weighted average interest rate of 4.24 % and (ii) $302.2 million of real estate assets.

Over the past nine months, our efforts have been focused on purchasing the remaining interests of our joint venture partners in the unconsolidated ventures that own multi-family properties.

We refer to such purchases and the related effects on our financial statements (as described below), as the “Partner Buyouts”.

In 2021, the six months ended June 30, 2022 and subsequent thereto, we completed three, six and five Partner Buyouts, respectively.

After a Partner Buyout is completed, such multi-family property is wholly owned and the accounts and operations of such property are included in our consolidated balance sheet and statements of operations, respectively, as of the date of completion of such purchase.

Our assets, liabilities, revenues and expenses have increased significantly as a result of these Partner Buyouts.

Had the 11 properties included in the Partner Buyouts completed in 2022 been included as of January 1, 2022 in our consolidated statements of operations, such properties would have contributed, for the six months ended June 30, 2022, an aggregate of $17.5 million of rental income and $16.4 million of expense (including $4.3 million of mortgage interest expense and $4.8 million of depreciation expense).

Completed Purchases of the Remaining Interests of Joint Venture Partners

During the Three Months Ended March 31, 2022

On March 23, 2022, we completed the acquisition of the remaining 28.1% interest owned by our joint venture partners in the entity that owns Verandas at Alamo Ranch, a 288-unit multi-family property located in San Antonio, TX.

The purchase price for the interest, which gives effect to the cost of purchasing the promote interest (as described under "- Contracts to Purchase the Remaining Interests of Joint Venture Partners ") of our joint venture partner, was $8.7 million.

As a result, this property is wholly-owned and effective March 23, 2022, is included in our consolidated operations and accounts, including mortgage debt in principal amount of $27 million with an interest rate of 3.64% and maturing in December 2029.

We anticipate that in the quarter ending June 30, 2022, this property will generate approximately $1.2 million of rental revenues, $579,000 of real estate operating expenses, $258,000 of interest expense and $518,000 of depreciation.

For the quarter ended March 31, 2022, the average occupancy rate at this property was 94.7% and the average monthly rental rate was $1,206.

Subsequent to the Three Months Ended March 31, 2022

On April 7, 2022, we acquired the remaining 21.6% interest owned by our joint venture partners in the entity that owns Vanguard Heights, a 174-unit multi-family property located in Creve Couer, MO.

The purchase price for the interest, which gives effect to the cost of purchasing the promote interest of our joint venture partner, was $4.8 million.

As a result, this property is wholly-owned by us and effective April 7, 2022, is included in our consolidated operations and accounts, including mortgage debt of $29.7 million with an interest rate of 4.41% and maturing in July 2031.

We anticipate that in the quarter ending June 30, 2022, this property will generate approximately $900,000 of rental revenues, $367,000 of real estate operating expenses, $337,000 of interest expense and $495,000 of depreciation.

For the quarter ended March 31, 2022, the average occupancy rate at this property was 93.1% and the average monthly rental rate was $1,569.

Contracts to Purchase the Remaining Interests of Joint Venture Partners in Nine Unconsolidated Ventures

From February 17, 2022 through April 6, 2022, we entered into agreements to acquire the remaining interests of our joint venture partners in the unconsolidated joint ventures that own the properties identified below.

It is anticipated that these transactions, subject to the satisfaction of customary closing conditions, including the approval of the holders of the applicable mortgage debt, will be completed by August 1, 2022.

Except as otherwise indicated, the mortgage debt reflected is currently on the property and after the completion of the applicable acquisition, will be included in our consolidated balance sheet (dollars in thousands):

Date of Agreement Property Name Location Units Remaining Interest to be Purchased Book Value of Property at 3/31/22 Purchase Price (1) Estimated Amount of Debt to be Included on our Consolidated Balance Sheet

February 2022 Jackson Square Tallahassee, FL 242 20 % $ 25,102 $ 6,220 $ 21,524

February 2022 Grove at River Place Macon, GA 240 20 % 12,829 7,485 11,481

February 2022 The Woodland Apartments Boerne, TX 120 20 % 11,394 3,550 7,935

March 2022 Brixworth at Bridge Street Huntsville, AL 208 20 % 11,844 10,851 18,500 (2)

April 2022 Abbotts Run Willmington, NC 264 20 % 37,552 8,560 23,160

April 2022 Civic Center I (3)

Southaven, MS 392 25 % 30,831 18,063 27,544

April 2022 Civic Center II (3)

Southaven, MS 384 25 % 32,725 17,694 30,288

April 2022 Magnolia Pointe at Madison Madison, AL 204 20 % 18,474 7,132 15,000

April 2022 Somerset at Trussville Birmingham, AL 328 20 % 40,300 9,785 32,250

Set forth below is information regarding the Partner Buyouts completed during the periods indicated below.

Except as otherwise indicated, the mortgage debt reflects the debt that was on such property at the time of the purchase of the remaining interest.

The purchase price gives effect to our purchase of the joint venture partners' "promote interests" (as more fully described in the Annual Report) (dollars in thousands):

During the Three Months Ended June 30, 2022

Property Name Location Units Percent Acquired Purchase Price (1) Mortgage Debt (2) Closing Date Interest Rate Maturity

Vanguard Heights Creve Couer, MO 174 21.6 % $ 4,880 $ 29,700 April 2022 4.41 % July 2031

Jackson Square Tallahassee, FL 242 20.0 % 7,215 21,524 May 2022 4.19 % September 2027

Brixworth at Bridge Street (3)

Huntsville, AL 208 20.0 % 10,697 11,147 May 2022 4.25 % June 2032

Woodland Apartments Boerne, TX 120 20.0 % 3,881 7,905 May 2022 4.74 % February 2026

Grove at River Place (4) Macon, GA 240 20.0 % 7,485 11,426 June 2022 4.39 % February 2026

Total 984 $ 34,158 $ 81,702

____________________________________

(1) The purchase (i) price gives effect to the purchase of the "promote interest" (as more fully described in the Annual Report) of our joint venture partners and

(ii) is subject to customary closing and similar adjustments.

(2) The current mortgage debt of $11,184 is to be refinanced with approximately $18,500 of new ten-year mortgage debt with an anticipated interest rate of

4.25% (the "New Mortgage Debt").

(3) The completion of the sale of each of Civic Center I and Civic Center II is conditioned upon the closing of one another.

The purchase price reflected for

each represents an allocation of the total purchase price based on number of units.

To fund these purchases, we anticipate using our available cash, a portion of the proceeds from the Cinco/Vive Sales, a portion of the proceeds of the New Mortgage Debt, funds from our at-the-market equity offering program and, funds from our credit facility.

After a purchase is completed, such property will be wholly-owned and the accounts ( i.e., the assets and liabilities), and operations of such property will be included directly, from the date of such purchase, in our consolidated balance sheets and consolidated statement of operations, respectively.

Property Dispositions

Dispositions of Joint Venture Properties

(1) Excludes closing costs and operating cash acquired from the joint ventures.

(2) Excludes fair value adjustments of $945 determined as part of the purchase price allocation.

(3) The original mortgage debt of $11,147 was refinanced with a new ten-year mortgage debt of $18,592 immediately following the buyout.

(4) Includes a supplemental mortgage of $1,056 which was paid off immediately following the buyout.

Subsequent to the quarter ended June 30, 2022, the Company completed the purchase of partners' remaining interests in five joint ventures that own the properties identified below:

Property Name Location Units Percent Acquired Purchase Price Closing Date Estimated Amount of Debt to be Included on our Consolidated Balance Sheet (1) Maturity Interest Rate

Civic Center I Southaven, MS 392 25% $ 18,233 July 12, 2022 $ 27,429 March 2026 4.24 %

Civic Center II Southaven, MS 384 25% 17,942 July 12, 2022 30,153 September 2026 3.73 %

Abbotts Run Willmington, NC 264 0.20 9,010 July 14, 2022 23,160 July 2030 4.71 %

Somerset at Trussville Birmingham, AL 328 20% 10,558 July 19, 2022 32,250 June 2029 4.19 %

Magnolia Pointe at Madison Madison, AL 204 20% 7,246 Aug 3, 2022 15,000 January 2028 4.08 %

Total 1,572 $ 62,989 $ 127,992

(1) Excludes fair value adjustments to be determined as part of the purchase price allocations

Joint Venture Property Dispositions

Completed Dispositions

On February 8, 2022, the unconsolidated joint venture which owned Verandas At Shavano, a 288-unit multi-family property in which we had a 65% interest, sold the property for $53.8 million and recognized a gain on the sale of this property of $23.7 million (the "Shavano Sale").

As a result of the sale, we recorded a gain of $13.0 million.

The mortgage debt secured by this property and paid-off in connection with the sale was in principal amount of $25.1 million, had an interest rate of 3.61% and was scheduled to mature in May 2023.

During 2021, this property contributed $526,000 of equity in earnings of unconsolidated joint ventures.

Contracts to Dispose of Joint Venture Properties

In April 2022, the unconsolidated joint venture that owns Retreat at Cinco Ranch, located in Katy, Texas, in which we hold a 75% equity interest, entered into an agreement to sell the property for $68.5 million.

This property, which as of March 31, 2022, had mortgage debt of $30.2 million, with a remaining term to maturity of 3.8 years and an interest rate of 4.44%, contributed $336,000 of equity in loss of unconsolidated joint ventures in 2021.

We anticipate that our share of the gain, after giving effect to our approximate $1.1 million share of the mortgage prepayment charge, will be approximately $16.4 million.

In May 2022, the unconsolidated joint venture that owns The Vive, a 312-unit multi-family property located in Kannapolis, NC, in which we hold a 65% equity interest, entered into an agreement to sell the property for $92.0 million.

This property, which as of March 31, 2022, had mortgage debt of $31.6 million, with a remaining term to maturity of 30 years and an interest rate of 3.52%, contributed $77,000 of equity in earnings of unconsolidated joint ventures in 2021.

We anticipate that our share of the gain, after giving effect to our approximate $738,000 share of the mortgage prepayment charge, will be approximately $21.5 million.

We anticipate that the Cinco/Vive Sales will be completed, subject to the satisfaction of customary closing conditions, during the quarter ending June 30, 2022.

Sale of Vacant Land Parcel

On February 2, 2022, we completed the sale of a vacant land parcel located in Daytona, Florida for a sales price of $4.7 million, and, after closing costs, recognized a nominal gain.

In 2020, we recognized an impairment charge of $3.6 million in connection with this property.

At December 31, 2021, this property was classified as held-for-sale.

Other Activities During the Three Months Ended March 31, 2022

Investment in Multi-Family Development Project

On March 10, 2022, we purchased a 17.45% interest in Stono Oaks, a planned 240-unit ground-up multi-family development, located in Johns Island, SC.

The purchase price for the interest was $3.5 million, including $1.4 million held in escrow.

We anticipate that this project will be completed in the fourth quarter of 2023.

Debt Reduction

In addition to the debt pay-offs described in "- Completed Purchases of the Remaining Interests of Joint Venture Partner " in connection with property dispositions, we paid-off, one month prior to its maturity, mortgage debt of $14.6 million bearing an interest rate of 4.29% on the Avalon Apartments-Pensacola, FL (the "Avalon Debt").

On June 14, 2022, the unconsolidated joint venture that owns Retreat at Cinco Ranch, located in Katy, Texas and in which we hold a 75% equity interest, sold the property for $68.3 million, recognized a $30.6 million gain on the sale of this property and recorded a $1.1 million mortgage prepayment charge.

As a result of the sale, we recorded a $17.4 million gain and $686,000 mortgage prepayment charge, representing our share of the gain and the mortgage prepayment charge, respectively.

The mortgage debt securing the property and paid off in connection with the sale was in principal amount of $30.1 million, with a remaining term to maturity of 3.6 years and an interest rate of 4.44%.

In 2021, this property contributed $336,000 of equity in loss of unconsolidated joint ventures.

On June 30, 2022, the unconsolidated joint venture that owns The Vive, a 312-unit multi-family property located in Kannapolis, NC, in which we hold a 65% equity interest, sold the property for $91.3 million, recognized a $47.1 million gain on the sale of this property and recorded a $1.6 million mortgage prepayment charge.

As a result of the sale, we recorded a $22.7 million gain and $787,000 share of the mortgage prepayment charge, representing our share of the gain and the mortgage prepayment charge, respectively.

The mortgage debt securing the property and paid off in connection with the sale was in principal amount of $31.4 million, with a remaining term to maturity of 29.7 years and an interest rate of 3.52%.

In 2021, this property contributed $77,000 of equity in earnings of unconsolidated joint ventures.

Anticipated Dispositions

On June 20, 2022, an unconsolidated joint venture in which we hold an 80% equity interest entered into an agreement to sell Waters Edge at Harbison, a 204-unit multi-family property located in Columbia, SC, for a sales price of approximately $32.4 million.

We anticipate that this transaction, which is subject to the satisfaction of customary closing conditions, will be completed in August/September 2022, and we estimate that we will recognize a gain on the sale of this property of approximately $11.5 million, and an approximate $263,000 mortgage prepayment charge, representing our share of the gain and the mortgage prepayment charge, respectively.

As of June 30, 2022, this property had mortgage debt of $12.3 million with a remaining term to maturity of 4.2 years and an interest rate of 4.28%.

In 2021, this property contributed $66,000 of equity in loss of unconsolidated joint ventures.

Other Activities During the Three Months Ended June 30, 2022

Dividend increase

We increased our quarterly dividend by to $0.25, an increase of 8.7% from the immediately preceding dividend payment.

This dividend was payable on July 8, 2022.

Sale of Common Stock Pursuant to the ATM Program

We sold 136,279 shares pursuant to our ATM sales program at an average price of $22.61 per share.

We sold 137,477 shares pursuant to our at-the-market offering program at an average price of $22.75 per share.

Net proceeds after commissions and fees was $3.1 million.

Results of Operations – Three months ended March 31, 2022 compared to three months ended March 31, 2021.

Equity Incentive Program Activity

In June 2022, we awarded to 16 individuals restricted stock units (“RSUs”) and related dividend equivalent rights to acquire an aggregate of up to 212,69 shares of common stock,.

Generally, the awards vest in 2025 subject to satisfaction of, among other things, market and performance conditions similar to the RSUs granted in 2021.

See note 3 to our consolidated financial statements.

Dividend Reinvestment Plan

See Note 3 to our consolidated financial statements for information regarding our dividend reinvestment plan.

Results of Operations – Three months ended June 30, 2022 compared to three months ended June 30, 2021.

As used herein, the term "same store properties" refers to operating properties that were owned for the entirety of the periods presented.

For the three months ended March 31, 2022 and 2021, there were seven same store properties in our consolidated portfolio.

For the three and six months ended June 30, 2022 and 2021, there were seven same store properties in our consolidated portfolio.

The following table compares our revenues for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in thousands):

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The increase is due to the following changes:

• $4.4 million due to the Partner Buyouts at four properties( i.e., primarily Bells Bluff, Crestmont at Thornblade, Crossings of Bellevue in 2021 and, to a lesser extent, Verandas at Alamo Ranch in February 2022 (collectively, the “Consolidating Transactions”));

• $7.5 million due to the Partner Buyouts, including $1.8 million from the Partner Buyouts completed during the three months ended June 30, 2022;

• $683,000 primarily due to an increase in average rental rates at same store properties.

1 unchanged sentence

The following table compares our expenses for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in thousands) 2022 2021 Increase

3 unchanged sentences

General and administrative 3,533 3,154 379 12.0 %

Impairment charge — 520 (520) N/M

Depreciation and amortization 5,010 1,416 3,594 253.8 %

2 unchanged sentences

The increase is due primarily to:

• the inclusion of $1.9 million relating to the Consolidating Transactions;

• $224,000 at same store properties due to increases across most expense categories.

• $3.3 million relating to the Partner Buyouts, including $731,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $279,000 at same store properties due to a $93,000 increase in replacement costs and a $186,000 increase across other expense categories.

The increase was offset by a decline of $357,000 due to the Kendall Sale.

Interest expense.

The change is due to a $1.0 million increase from the inclusion of interest expense related to the Consolidating Transactions.

This was offset by a $664,000 decrease due to the payoff of $31.9 million of mortgage debt in 2021 and, to a lesser extent, the payoff of the Avalon Debt in the current period.

The change is due to a $1.6 million increase from the Partner Buyouts, including $618,000 from the Partner Buyouts completed during the three months ended June 30, 2022.

This was offset by decreases of $354,000 due to the payoff of $31.9 million of mortgage debt in 2021, $208,000 due to the payoff of the Avalon Debt ( i.e., $14.6 million of mortgage debt on Avalon Apartments - Pensacola, FL) in the three months ended March 31, 2022 and $107,000 due to the Kendall Sale.

We anticipate that our interest expense will increase due to the Partner Buyouts, the increasing interest rate on our junior subordinated notes and the increase in borrowings from, and the interest rate on, our credit facility.

See Item 3 " Quantitative and Qualitative Disclosures About Market Risks " for information regarding the impact of changing interest rates on our floating rate junior subordinated notes.

General and administrative.

The increase is due primarily to a $436,000 increase in non-cash compensation expense including increased amortization of:

• $213,000 relating to the grant of performance and market based restricted stock units (the "RSUs") in June 2021;

• $130,000 with respect to restricted stock granted in June 2021;

• $93,000 due to the restricted stock granted in January 2021 (as a result of the higher fair value of the shares granted in in 2021 in comparison to the restricted stock granted in 2016).

The increase is due primarily to a $431,000 increase in non-cash compensation expense including increases of:

• $216,000 due to the inclusion, for the entire three months ended June 30, 2022 of the amortization expense related to the performance and market based restricted stock units (the "RSUs") granted in June 2021;

• $111,000 due to the inclusion, for the entire three months ended June 30, 2022, of the amortization expense with respect to the restricted stock granted in June 2021;

• $104,000 due to the amortization expense related to restricted stock granted in January 2022 (as a result of the higher fair value of the shares granted in 2021 in comparison to the restricted stock granted in 2017).

Offsetting this increase was a reduction of professional fees of $182,000 due primarily to the inclusion, in the corresponding period of the prior year, of costs related to a terminated stock offering.

Impairment charge

In the three months ended June 30, 2021, we recorded an impairment charge of $520,000 representing the excess of the book value of our investment in the Opop Tower and Loft properties, St Louis, MO, over the anticipated selling price of the investment.

There was no comparable charge in the current period.

Depreciation and amortization

The increase is due primarily to the inclusion of $2.2 million of such expense from the Consolidating Transactions.

The increase is due primarily to $3.6 million from the Partner Buyouts, including $ 870,000 from the Partner Buyouts completed during the three months ended June 30, 2022.

Loss on extinguishment of debt

In the three months ended June 30, 2022, we incurred a $563,000 of loss on extinguishment of debt in connection with the refinance of a mortgage that occurred in connection with a Partner Buyout.

There was no comparable expense in the corresponding period of the prior year.

Income tax provision

In the three months ended June 30, 2022, income tax provision increased to $724,000 from $67,000 in the corresponding period of the prior years due to an increase in state level taxes accrued, the result of higher income in the current period and the reduction in certain states in net operating loss carryforwards available to offset the income.

Unconsolidated Joint Ventures - Results of Operations

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The table below reflects the condensed income statements of our Unconsolidated Properties.

In accordance with US generally accepted accounting principles, each of the line items in the chart below (other than equity in income (loss) of unconsolidated joint ventures) is presented as if these properties are wholly owned by us although our equity interests in these properties ranges from 17.45% to 80% (see note 8 of our consolidated financial statements) (dollars in thousands):

Three Months Ended March 31,

In accordance with US generally accepted accounting principles, each of the line items in the chart below (other than equity in income (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint ventures) is presented as if these properties are wholly owned by us although our equity interests in these properties ranges from 17.45% to 80% (see note 8 of our consolidated financial statements) (dollars in thousands):

Three Months Ended June 30,

2022 2021 Increase

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Insurance recoveries from unconsolidated joint ventures — 490 (490) N/A

Gain on insurance recoveries 515 — 515 N/A

Loss on extinguishment of debt (30) — (30) N/A

Gain on sale of real estate 23,652 — 23,652 N/A

Net income (loss) $ 25,592 $ (1,929) $ 27,521 N/A

Gain on insurance recoveries from unconsolidated joint ventures 52 — 52 N/A

Loss on extinguishment of debt from unconsolidated joint ventures (2,888) — (2,888) N/A

Gain on sale of real estate from unconsolidated joint ventures 77,681 — 77,681 N/A

Net income (loss) from unconsolidated joint ventures $ 77,031 $ (486) $ 77,517 N/A

Equity in earnings (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties $ 40,048 $ (492) $ 40,540

Set forth below is an explanation of the most significant changes in the components of the equity in earnings (loss) of unconsolidated joint ventures.

Same store properties at Unconsolidated Properties represent 27 properties that were owned for the entirety of the periods being compared and excludes four properties, three of which were sold and the fourth which is the subject of the Consolidating Transaction.

Same store properties at Unconsolidated Properties represent 14 properties that were owned for the entirety of the periods being compared.

Rental and other revenues from unconsolidated joint ventures

The decrease is composed of :

• $6.0 million from the Partner Buyouts, including a net $1.4 million from the Partner Buyouts effected during the three months ended June 30, 2022;

• $4.7 million from the sale in 2021 of the properties by the unconsolidated joint ventures which owned The Avenue Apartments-Ocoee, FL and Parc at 980-Lawrenceville, GA (collectively, the "Avenue/Parc Sales");

• $3.4 million from the Consolidating Transactions;

• $1.4 million from the sale in 2021 of our interests in the unconsolidated joint ventures that owned Anatole Apartments-Daytona Beach, FL and Tower at Opop and Lofts at Opop-St.

• $916,000 from the sale in 2021 of the properties owned by the unconsolidated joint ventures which owned Verandas at Shavano - San Antonio, TX ("Shavano"), Retreat at Cinco Ranch - Katy, TX ("Cinco") and The Vive - Kanapolis, NC, (the "Vive";

collectively with Shavano and Cinco, the "Shavano/Cinco/Vive Sales"), and in particular, the sale of Shavano;

• $863,000 from the sale in 2021 of our interests in the unconsolidated joint ventures that owned Anatole Apartments-Daytona Beach, FL and Tower at Opop and Lofts at Opop-St.

Louis, MO (collectively, the "Anatole/Opop Sales").

• $514,000 due to the Shavano Sale.

Offsetting the decrease was $2.4 million increase from same store sales, including $1.7 million from increased rental rates, $545,000 from increased occupancy, and $177,000 from increased ancillary fees.

Offsetting the decrease was $1.6 million increase from same store sales, including $1.5 million from increased rental rates.

Real estate operating expenses from unconsolidated joint ventures

The decrease is composed of:

• $2.9 million from the Partner Buyouts, including $614,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $2.0 million from the Avenue/Parc Sales;

• $1.7 million from the Consolidating Transactions;

• $697,000 from the Shavano/Cinco/Vive Sales, including $547,000 from the sale of Shavano;

• $540,000 from the Anatole/Opop Sales.

• $239,000 from the Shavano Sale.

Offsetting this decrease was a $193,000 increase in such expenses at same store properties, with expenses generally increasing across most expense categories.

Offsetting this decrease was a $762,000 increase in such expenses at same store properties, with expenses generally increasing across most expense categories including payroll, utilities and repairs and maintenance.

Interest expense from unconsolidated joint ventures.

The decrease is due to the decrease in mortgage debt due to property sales and the Consolidated Transactions-in particular:

The decrease is due to the decrease in mortgage debt due to property sales and the Partner Buyouts-in particular:

• $1.7 million from the Partner Buyouts, including $551,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $1.1 million from the Avenue/Parc Sales;

• $913,000 from the Consolidating Transactions;

• $365,000 from the sale of Shavano and The Vive;

• $358,000 from the Anatole/Opop Sales.

1 unchanged sentence

The decrease is composed of:

• $2.2 million from the Partner Buyouts, including $539,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $1.1 million from the Avenue/Parc Sale;

• $1.4 million from the Consolidating Transactions;

• $898,000 from the Shavano/Cinco/Vive Sales;

• $371,000 from the Anatole/Opop Sales.

• $314,000 from the Shavano Sale.

Impairment charges from unconsolidated joint ventures

During the three months ended March 31, 2021, we recognized $2.3 million of impairment charges at three properties located in Texas due to storm damage in 2021 (the "Texas Storm");

Impairment of assets from unconsolidated joint ventures

During the three months ended June 30, 2021, we recognized $490,000 of impairment charges at two properties located in Texas due to storm damage in 2021 (the "Texas Storm");

there were no comparable charges in the current period.

Insurance recoveries from unconsolidated joint ventures

During the three months ended March 31, 2021, we recognized $2.3 million of insurance recoveries related to the impairment charges resulting from the Texas Storm;

During the three months ended June 30, 2021, we recognized $490,000 of insurance recoveries related to the impairment charges resulting from the Texas Storm;

there were no comparable recoveries in the current period.

Loss on extinguishment of debt

See " - Completed Dispositions" for information about the loss on extinguishment of debt from the sales of Cinco and The Vive.

There was no comparable loss in the three months ended June 30, 2021.

Gain on sale of real estate from unconsolidated joint ventures

See "- Completed Dispositions" for information about the gain from the sales of Cinco and The Vive.

There was no comparable gain in the three months ended June 30, 2021.

Results of Operations – Six months ended June 30, 2022 compared to six months ended June 30, 2021.

The following table compares our revenues for the periods indicated:

Six Months Ended June 30,

(Dollars in thousands):

2022 2021 Increase

Rental and other revenue from real estate properties 26,113 14,053 $ 12,060 85.8 %

Other income 6 7 (1) (14.3) %

Total revenues $ 26,119 $ 14,060 $ 12,059 85.8 %

Rental and other revenue from real estate properties

The increase is due to the following changes:

• $11.9 million due to the Partner Buyouts including $3.1 million from the Partner Buyouts completed during the six months ended June 30, 2022;

• $1.2 million primarily due to an increase in average rental rates at same store properties.

Offsetting the increase is a $1.2 million decrease due to the Kendall Sale.

The following table compares our expenses for the periods indicated:

Six Months Ended June 30,

(Dollars in thousands) 2022 2021 Increase

(Decrease) % Change

Real estate operating expenses 11,101 6,283 $ 4,818 76.7 %

Interest expense 4,933 3,269 1,664 50.9 %

General and administrative 7,166 6,268 898 14.3 %

Impairment charges — 520 (520) N/M

Depreciation and amortization 8,616 2,953 5,663 191.8 %

Total expenses 31,816 19,293 $ 12,523 64.9 %

Real estate operating expense.

The increase is due primarily to:

• $5.2 million relating to the Partner Buyouts, including $1.4 million from the Partner Buyouts completed during the six months ended June 30, 2022;

• $503,000 at same store properties due to increases of $134,000 in replacement costs, $96,000 in payroll and costs and $273,000 across other expense categories.

The increase was offset by a decline of $813,000 due to the Kendall Sale.

Interest expense.

The change is due to a (i) $2.9 million increase from the inclusion of interest expense related to the Partner Buyouts, including $905,000 from Partner Buyouts completed during the six months ended June 30, 2022 and (ii) $115,000 due to the increase in interest expense on our floating rate junior subordinated notes.

The increase was offset by a $820,000 decrease due to the payoff of $31.9 million of mortgage debt in 2021, $280,000 related to the payoff of the Avalon Debt and $271,000 due to the Kendall Sale.

See Item 3 " Quantitative and Qualitative Disclosures About Market Risks " for information regarding the impact of changing interest rates on our floating rate junior subordinated notes.

General and administrative.

The increase is due to a:

• $867,000 increase in non-cash compensation expense including increases of:

– $429,000 due to the inclusion, for the entire six months ended June 30, 2022, of the amortization expense related to the RSUs granted in June 2021;

– $254,000 due to the inclusion, for the entire six months ended June 30, 2022, of the amortization expense related to the restricted stock granted in June 2021;

– $184,000 due to the amortization expense related to the restricted stock granted in January 2022 (as a result of the higher fair value of the shares granted in 2022 in comparison to the restricted stock granted in 2017);

• $139,000 increase in cash compensation costs, including compensation allocated pursuant to the shared services agreement.

The increase was offset by the inclusion, in the corresponding period of the prior year, of $230,000 of professional fees and other costs incurred in connection with a terminated stock offering.

Impairment Charges

In the corresponding period of the prior year, we recorded an impairment charge of $520,000 representing the excess of the book value of our investment in the Opop Tower and Loft properties, St Louis, MO, over the anticipated selling price of the investment.

There was no comparable charge in the current period.

Depreciation and amortization

The increase is due primarily to the inclusion of $5.8 million of such expense from the Partner Buyouts, including $1.4 million from the Partner Buyouts completed during the six months ended June 30, 2022, offset by $123,000 from the Kendall Sale.

Gain on Sale of Real Estate

In the six months ended June 30, 2021, we recognized a $7.3 million gain on the Kendall Sale.

There was no comparable gain in the six months ended June 30, 2022.

Gain on Sales of Partnership Interest

In the six months ended June 30, 2021, we sold our interest in a joint venture that owned Anatole Apartments - Daytona, Beach, FL and recognized a gain of $2.2 million.

There was no comparable gain in the six months ended June 30, 2022.

Loss on extinguishment of debt

In the six months ended June 30, 2021, we incurred $563,000 of loss on extinguishment of debt with the refinance of a mortgage that took place with a Partner Buyout.

There was no comparable expense in the corresponding period of the prior year.

Income tax provision

In the six months ended June 30, 2022 income tax provision increased to $798,000 from $124,000 in the corresponding period of the prior year due to an increase in state level taxes accrued, the result of higher income in the current period and the reduction in certain states in net operating loss carryforwards available to offset the income.

Unconsolidated Joint Ventures - Results of Operations

Equity in earnings (loss) of unconsolidated joint ventures.

The table below reflects the condensed income statements of our Unconsolidated Properties.

Six Months Ended June 30,

2022 2021 Increase

(Decrease) % change

Rental and other revenues from unconsolidated joint ventures $ 47,338 $ 65,677 $ (18,339) (27.9) %

Real estate operating expense from unconsolidated joint ventures 21,011 30,936 (9,925) (32.1) %

Interest expense from unconsolidated joint ventures 10,919 16,994 (6,075) (35.7) %

Depreciation from unconsolidated joint ventures 11,844 20,176 (8,332) (41.3) %

Total expenses from unconsolidated joint ventures 43,774 68,106 (24,332) (35.7) %

Total revenues less total expenses from unconsolidated joint ventures 3,564 (2,429) 5,993 246.7 %

Other equity earnings 77 14 63 450.0 %

Impairment of assets from unconsolidated joint ventures — (2,813) 2,813 N/A

Insurance recoveries from unconsolidated joint ventures — 2,813 (2813) N/A

Gain on insurance recoveries from unconsolidated joint ventures 567 — 567 N/A

Loss on extinguishment of debt from unconsolidated joint ventures (2,918) — (2,918) N/A

Gain on sale of real estate from unconsolidated joint ventures 101,333 — 101,333 N/A

Net income (loss) from unconsolidated joint ventures 102,623 (2,415) $ 105,038 N/A

Equity in earnings (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties $ 54,239 $ (1,837) $ 56,076

Set forth below is an explanation of the most significant changes in the components of the equity in earnings (loss) of unconsolidated joint ventures.

Same store properties at Unconsolidated Properties represent 14 properties that were owned for the entirety of the periods being compared and excludes four properties, three of which were sold and the fourth which is the subject of the Consolidating Transaction.

Rental and other revenues from unconsolidated joint ventures

The decrease is composed of :

• $9.2 million from the Avenue/Parc Sales;

• $9.2 million from the Partner Buyouts, including $2.1 million from the Partner Buyouts completed during the six months ended June 30, 2022;

• $2.2 million from the Anatole/Opop Sales;

• a net $1.1 million, primarily due to the sale of Shavano.

Offsetting the decrease was $3.5 million increase from same store sales, including $2.8 million from increased rental rates, $584,000 from increased occupancy, and $136,000 from increased ancillary fees.

Real estate operating expenses from unconsolidated joint ventures

The decrease is composed of:

• $4.5 million from the Partner Buyouts, including $973,000 from the Partner Buyouts completed during the six months ended June 30, 2022;

• $3.9 million from the Avenue/Parc Sales;

• $1.4 million from the Anatole/Opop Sales;

• $870,000 from the sales of Shavano and Cinco, including $786,000 from the sale of Shavano.

Offsetting this decrease was a $782,000 increase in such expenses at same store properties, resulting from increases in payroll, utilities and repairs and maintenance.

Interest expense from unconsolidated joint ventures.

The decrease is due to the decrease in mortgage debt due to property sales and the Partner Buyouts-in particular:

• $2.7 million from the Partner Buyouts, including $840,000 from the Partner Buyouts completed during the six months ended June 30, 2022;

• $2.2 million from the Avenue/Parc Sales;

• $822,000 from the Anatole/Opop Sales;

• $322,000 from the sales of Shavano and Cinco.

Depreciation from unconsolidated joint ventures

The decrease is composed of:

• $3.7 million from the Partner Buyouts, including $917,000 from the Partner Buyouts completed during the six months ended June 30, 2022;

• $2.4 million from the Avenue/Parc Sale;

• $1.2 million from the Shavano/Cinco/Vive Sales;

• $882,000 from the Anatole/Opop Sales

Impairment of assets from unconsolidated joint ventures

During the six months ended June 30, 2021, we recognized $2.8 million of impairment charges at three properties located in Texas due to storm damage in 2021 (the "Texas Storm");

there were no comparable charges in the current period.

Insurance recoveries from unconsolidated joint ventures

During the six months ended June 30, 2021, we recognized $2.8 million of insurance recoveries related to the impairment charges resulting from the Texas Storm;

there were no comparable recoveries in the current period.

Gain on insurance recoveries from unconsolidated joint ventures .

In the three months ended March 31, 2022, we recognized $515,000 in gains primarily due to the fact that the amounts we received on claims related to insurance recoveries from the Texas Storm exceeded the assets previously written-off.

In the six months ended June 30, 2022, we recognized $567,000 in gains primarily due to the fact that the amounts we received on claims related to insurance recoveries from the Texas Storm exceeded the assets previously written-off.

Loss on early extinguishment of debt from unconsolidated joint ventures

See "- Completed Dispositions " for information about the loss on extinguishment of debt from the sales of Cinco and The Vive.

There was no comparable charge in the six months ended June 30, 2021.

Gain on sale of real estate from unconsolidated joint ventures

See "- Completed Dispositions" for information about the gain from the Shavano Sale.

There was no comparable gain in the three months ended March 31, 2021.

See "- Completed Dispositions" for information about the gain from the Shavano/Cinco/Vive Sales.

There was no comparable gain in the six months ended June 30, 2021.

Liquidity and Capital Resources

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Generally, our primary sources of capital and liquidity are the operations of our multi-family properties (including distributions from the operations of our multi-family joint ventures and distributions from sale transactions), mortgage debt financings and re-financings, our share of the proceeds from the sale of properties, the sale of shares of our common stock pursuant to our at-the-market equity distribution program, borrowings from our credit facility and our available cash (including restricted cash).

On March 31, 2022 and May 2, 2022, our cash and cash equivalents, were approximately $29.7 million and $21.5 million, respectively, and excludes funds held at our unconsolidated joint ventures.

We anticipate that from April 1, 2022 through 2024, our operating expenses, $104.5 million of mortgage amortization and interest expense, and $25.7 million of balloon payments (including $78.8 million and $10.8 million, respectively, from unconsolidated joint ventures) due with respect to mortgages maturing from 2022 to 2024, estimated cash dividend payments of at least $47.0 million (assuming (i) the current quarterly dividend rate of $0.23 per share and (ii) 18.6 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), sales of properties and, to the extent available, our credit facility.

On June 30, 2022 and August 5, 2022, our cash and cash equivalents, were approximately $57.0 million and $13.9 million, respectively, and excludes funds held at our unconsolidated joint ventures.

We anticipate that from July 1, 2022 through 2024, our operating expenses, $93.4 million of mortgage amortization and interest expense (including $56.3 million from unconsolidated joint ventures), and $14.9 million of balloon payments due with respect to mortgages maturing from 2022 to 2024, estimated cash dividend payments of at least $46.8 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.7 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), sales of properties and, to the extent available, our credit facility.

Our operating cash flow and available cash is insufficient to fully fund the $14.9 million of balloon payments, and if we are unable to refinance such debt, we may need to issue additional equity or dispose of properties, in each case on potentially unfavorable terms.

See " – Contracts to Purchase the Remaining Interests of Joint Venture Partners in Nine Unconsolidated Ventures " for information regarding the source of funding to effectuate the Partner Buyouts of nine multi-family properties owned by unconsolidated joint ventures.

At March 31, 2022 , we had mortgage debt of $747.3 million (including $534.5 million of mortgage debt of our unconsolidated subsidiaries).

At June 30, 2022 , we had mortgage debt of $689.9 million (including $390.0 million of mortgage debt of our unconsolidated subsidiaries).

The mortgage debt at our:

(i) consolidated subsidiaries had a weighted average interest rate of 3.91% and a weighted average remaining term to maturity of approximately 9.15 years, and (ii) at our unconsolidated subsidiaries had a weighted average interest rate of 4.00% and a remaining term to maturity of approximately 6.25 years.

Capital improvements at (i) 13 multi-family properties will be funded by approximately $6.5 million of restricted cash available at March 31, 2022 and the cash flow from operations at such properties and (ii) other properties will be funded from the cash flow from operations of such properties.

Capital improvements at (i) nine multi-family properties will be funded by approximately $4.8 million of restricted cash available at June 30, 2022 and the cash flow from operations at such properties and (ii) other properties will be funded from the cash flow from operations of such properties.

Junior Subordinated Notes

As of March 31, 2022, $37.4 million (excluding deferred costs of $292,000) in principal amount of our junior subordinated notes is outstanding.

As of June 30, 2022, $37.4 million (excluding deferred costs of $287,000) in principal amount of our junior subordinated notes is outstanding.

These notes mature in April 2036, contain limited covenants (including covenants prohibiting us from paying dividends or repurchasing capital stock if there is an event of default (as defined therein) on these notes), are redeemable at our option and bear an interest rate, which resets and is payable quarterly, of three-month LIBOR plus 200 basis points.

At March 31, 2022 and 2021, the interest rate on these notes was 2.30% and 2.21%, respectively.

At August 5, 2022, June 30, 2022 and 2021, the interest rate on these notes was 4.78%, 3.29% and 2.19%, respectively.

Credit Facility

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The credit facility matures in November 2024.

As of the date of this filing, no amounts are outstanding on the credit facility and $35 million is available to be borrowed thereunder.

As of the date of this filing, $22 million is outstanding on the credit facility and $13 million is available to be borrowed thereunder.

The terms of the credit facility include certain restrictions and covenants which, among other things, limit the incurrence of liens, require that we maintain and include in the collateral securing the facility at least two unencumbered properties with an aggregate value(as calculated pursuant to the facility) of at least $50 million, and require compliance with financial ratios relating to, among other things, the minimum amount of debt service coverage with respect to the properties (and amounts drawn on the credit facility) used in calculating the borrowing base.

Net proceeds received from the sale, financing or refinancing of wholly-owned properties are generally required to be used to repay amounts outstanding under the credit facility.

At March 31, 2022, we were in compliance in all material respects with the requirements of the facility.

At June 30, 2022, we were in compliance in all material respects with the requirements of the facility.

Other Financing Sources and Arrangements

At March 31, 2022, we are joint venture partners in approximately 22 unconsolidated joint ventures which own 23 multi-family properties (including a development project) and that the distributions to us from these joint venture properties ($19.7 million (including $14.9 million from the sale of the property) in the quarter ended March 31, 2022) are a material source of our liquidity and cash flow.

At June 30, 2022, we are joint venture partners in unconsolidated joint ventures which own 15 multi-family properties (including a development project) and the distributions to us from these joint venture properties ($54.9 million (including $51.7 million from the sale of two properties) in the quarter ended June 30, 2022) are a material source of our liquidity and cash flow.

Further, we may be required to make significant capital contributions with respect to these properties.

At March 31, 2022, these joint venture properties have a net equity carrying value of $109.4 million and are subject to net mortgage debt, which is not reflected on our consolidated balance sheet, of $534.5 million.

At June 30, 2022, these joint venture properties have a net equity carrying value of $79.8 million and are subject to net mortgage debt, which is not reflected on our consolidated balance sheet, of $390.0 million.

Although BRT Apartments Corp.

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Cash Distribution Policy

that we distribute to our stockholders within the time frames prescribed by the Code at least 90% of our ordinary taxable income.

We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to as the “Code.” To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute to our stockholders within the time frames prescribed by the Code at least 90% of our ordinary taxable income.

Management currently intends to maintain our REIT status.

2 unchanged sentences

Even if we qualify for Federal taxation as a REIT, we are subject to certain state and local taxes on our income and to Federal income and excise taxes on undistributed taxable income, ( i.e ., taxable income not distributed in the amounts and in the time frames prescribed by the Code).

Our net operating loss at December 31, 2021 was approximately $35.7 million;

therefore, we are not currently required by Code provisions relating to REITs to pay cash dividends to maintain our status as a REIT.

Notwithstanding the foregoing, on April 7, 2022, we paid a quarterly cash dividend of $0.23 per share.

Our net operating loss at December 31, 2021 was approximately $36.0 million and we anticipate applying this amount to offset income generated in 2022.

On July 8, 2022, we paid a quarterly cash dividend of $0.25 per share.

We carefully monitor our discretionary spending.

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The tables below provides a reconciliation of net loss determined in accordance with GAAP to FFO and AFFO on a dollar and per share basis for each of the indicated periods (dollars in thousands, except per share amounts):

Three Months Ended March 31,

GAAP Net income (loss) attributable to common stockholders $ 11,508 $ (3,765)

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

GAAP Net income attributable to common stockholders $ 35,607 $ 6,027 $ 47,115 $ 2,262

depreciation of properties 5,010 1,416 8,616 2,953

our share of depreciation in unconsolidated joint venture properties 3,259 6,276 7,577 12,875

Impairment charge — 520 — 520

our share of impairment charge in unconsolidated joint venture properties — 348 — 2,010

5 unchanged sentences

straight-line rent accruals 6 (10) 12 (20)

loss on extinguishment of debt 563 — 563 —

our share of loss on extinguishment of debt from unconsolidated joint venture properties 1,473 — 1,492 —

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Adjusted funds from operations attributable to common stockholders $ 6,945 $ 5,489 $ 14,188 $ 10,614

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income (loss) attributable to common stockholders $ 1.91 $ 0.34 $ 2.53 $ 0.13

1 unchanged sentence

our share of depreciation in unconsolidated joint venture properties 0.17 0.35 0.41 0.73

Impairment charge — 0.03 — 0.03

our share of impairment charge in unconsolidated joint venture properties — 0.02 — 0.11

5 unchanged sentences

straight line rent accruals — — — —

loss on extinguishment of debt 0.03 — 0.03 —

our share of loss on extinguishment of debt from unconsolidated joint venture properties 0.08 — 0.08 —

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Diluted shares outstanding for FFO and AFFO 18,661 17,320 18,616 17,521

FFO increased on an absolute basis for the three months ended March 31, 2022, from the corresponding 2021 period primarily due to the improved operating margins at consolidated and unconsolidated same store properties, the Consolidating Transactions and reduced interest expense.

The increase was offset by the Kendall Sale, the Avenue/Parc Sales, the Anatole/Opop Sales, the inclusion in the three months ended March 31, 2021 of significant insurance recoveries and the increase, in the three months ended March 31, 2022 from the corresponding period in 2021, of non-cash amortization of equity award expense.

AFFO increased on an absolute and diluted per share basis for the three months ended March 31, 2022 from the corresponding period in 2021 primarily due to the factors impacting the improvement in FFO, other than the effects of the significant insurance recoveries in 2021 and the non-cash compensation expense related to equity awards in the three months ended March 31, 2022.

Diluted per share FFO and AFFO were impacted in the three months ended March 31, 2022 by a 1.25 million increase in the weighted average shares of common stock outstanding from the first quarter of 2021 through the current quarter, primarily due to stock issuances pursuant to our at-the -market equity offering and equity incentive programs.

Three Months Ended June 30, 2022 and 2021

FFO for the three months ended June 30, 2022 decreased from the corresponding quarter in the prior year primarily due to increases in mortgage prepayment charges, state income taxes and non-cash compensation expense, and a decrease in insurance recoveries.

The decrease was offset by our share of reduced interest expense at our unconsolidated subsidiaries and improved operating margins at same store properties.

AFFO for the three months ended June 30, 2022 increased from the three months ended June 30, 2021, primarily reflecting improved operating margins and our share of reduced interest expense at our unconsolidated subsidiaries, offset by the increase in state income tax.

Diluted per share FFO and AFFO were impacted in the three months ended June 30, 2022 by a 1.3 million increase in the weighted average shares of common stock outstanding from the second quarter of 2021 through the current quarter, primarily due to stock issuances pursuant to our at-the market offering and our equity incentive programs.

Six Months Ended June 30, 2022 and 2021 - See " Results of Operations - Three Months Ended June 30, 2022 compared to three months ended June 30, 2021 ", for a discussion of these changes.

FFO decreased for the six months ended June 30, 2022 from the corresponding period in the prior year primarily due to the inclusion in the six months ended June 30, 2021 of significant insurance recoveries, and in the six months ended June 30, 2022, increases in the early extinguishment of debt charges, restricted stock and RSU amortization expense, and state income tax expense.

The decrease was offset by increased operating margins across our portfolio and our share of reduced interest expense at our unconsolidated subsidiaries.

AFFO increased for the six months ended June 30, 2022 from the corresponding period in 2021 primarily due to the increased operating margins across our portfolio and our share of reduced interest expense at our unconsolidated subsidiaries, offset by increased income tax expense.

Diluted per share FFO and AFFO were impacted in the six months ended June 30, 2022 by a 1.1 million increase in the weighted average shares of common stock outstanding from January 1, 2021 through the current quarter, primarily due to stock issuances pursuant to our at-the-market offering and equity incentive programs.

See - " Results of Operations - Six Months Ended June 30, 2022 compared to the six months ended June 30, 2021" , for a discussion of these changes.

Net Operating Income, or NOI, is a non-GAAP measure of performance.

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The following table provides a reconciliation of net income attributable to common stockholders as computed in accordance with GAAP to NOI of our consolidated properties for the periods presented (dollars in thousands):

Three Months Ended March 31,

GAAP Net income (loss) attributable to common stockholders $ 11,508 $ (3,765)

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

GAAP Net income attributable to common stockholders $ 35,607 $ 6,027 $ 47,115 $ 2,262

Other Income (2) (3) (6) (7)

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Gain on sale of real estate — (7,279) (6) (7,279)

Equity in earnings from sale of unconsolidated joint venture properties (12,961) —

Gain on sale of partnership interest — (2,244) — (2,244)

Equity in earnings from sale of unconsolidated joint

venture properties (40,098) — (53,059) —

Loss on extinguishment of debt 563 — 563 —

2 unchanged sentences

Net Operating Income $ 8,335 $ 3,792 $ 15,012 $ 7,770

Non-same store Net Operating Income $ 2,841 $ 532

Non-same store Net Operating Income (loss) $ 4,452 $ 313 $ (7,293) $ (845)

Same store Net Operating Income $ 3,883 $ 3,479 $ 7,719 $ 6,925

For the three months ended March 31, 2022, NOI increased $2.7 million from the corresponding period in 2021 primarily due to a $4.4 million increase in rental revenues (and in particular, the impact of the Consolidating Transactions) offset by a $1.9 million increase, primarily from the Consolidating Transactions, in real estate operating expenses.

Same store NOI in the three months ended March 31, 2022, increased by $390,000 from the corresponding period in 2021, due to a $614,000 increase in rental revenues (and in particular, the increase in average rental rates) offset by a $224,000 increase in real estate operating expenses.

See "-Results of Operations" for a discussion of these changes.

For the three months ended June 30, 2022, NOI increased $4.5 million from the corresponding period in 2021 primarily due to a $7.7 million increase in rental revenues (and in particular, the impact of the Partner Buyouts) offset by a $3.2 million increase, primarily from the Partner Buyouts, in real estate operating expenses.

Same store NOI in the three months ended June 30, 2022 increased by $404,000 from the corresponding period in 2021, due to a $683,000 increase in rental revenues (and in particular, the increase in average rental rates) offset by a $279,000 increase in real estate operating expenses.

See "-Results of Operations - Three Months Ended June 30, 2022 Compared to the three Months ended June 30, 2021 " for a discussion of these changes.

For the six months ended June 30, 2022, NOI increased $7.2 million from the corresponding period in 2021 primarily due to a $12.1 million increase in rental revenues (and in particular, the impact of the Partner Buyouts) offset by a $4.8 million increase, primarily from the Partner Buyouts, in real estate operating expenses.

Same store NOI in the six months ended June 30, 2022, increased by $794,000 from the corresponding period in 2021, due to a $1.3 million increase in rental revenues (and in particular, the increase in average rental rates) offset by a $503,000 increase in real estate operating expenses.

See "-Results of Operations - Six Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021 " for a discussion of these changes.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis